Chapter 14 john

john Fifteen months later, they are still waiting for funding.Looking back on the journey, Cowan says he was always confident that funding would follow. "It's a gestation period. I feel like things are moving quickly." But other members of the group were on edge."We have a sense of urgency that if we don't keep the momentum going then we're going to lose support," Paines said. But the time has not been fruitless.In fact, in many respects, the fifteen months of work have gone very well.Cowwin and his colleagues found some money to hold a few seminars.They also worked out a lot of the nuts and bolts of the organization, and they negotiated the appointment of Mike Simmons, Pete Carruthers' former right-hand man, as a part-time deputy director, taking a lot of the administrative work off Cowan's shoulders. load.They even got back the name of the institute they wanted.Previously they had to accept the name Rio Grande Institute simply out of necessity.After a year of existence as the "Rio Grande Institute," a local company came to them and said they wanted the name.So they said, "Okay. If you can help us get the name we want back." So the company just bought the name "Santa Fere Institute" for them from the nursing home. .That's it for the deal.

Perhaps most importantly, Cowin and his team managed to defuse a potentially explosive crisis with Gell-Mann.Gell-Mann has been an excellent, creative speaker.Moreover, he recruited some new members to the institute's board of directors from within his network."I'm always ready for them to say, 'No, I'm too busy,'" Gell-Mann said. "But they always say, 'Oh, God, of course! When can I come? I like the idea of ​​you guys.' .I've been waiting my whole life for an opportunity like this!'” But as chairman of the board and head of the fundraising, Gell-Mann simply didn't get anything done.The most polite thing to say about him is that he was not born an executive leader.Cowan was furious with him for this. "Marie's always somewhere else." Gell-Mann has too many things in his hands, and not all of them are in Santa Fe.His desk was full of unreviewed papers, he never returned his calls, and he drove people crazy.The dire situation was satisfactorily alleviated when the Institute held an executive meeting at the Paines home in Aspen in July 1985.Gell-Mann agreed to step down as chairman of the board to chair the newly formed scientific committee.This way he can happily develop a research plan for the Institute.Ed Knap, who had just returned from his tenure at the National Science Foundation, took over as chairman of the board.

Despite these advances, the angels with $100 million that the Institute had hoped for hadn't arrived.Cowwin and others are already trying to get it.Some major foundations are in no rush to pour money into such an outlandish project.Serious research projects desperately need their funding to survive the Reagan budget cuts."We're dealing with all the focal issues in the world today, and a lot of people laugh at it," Carruthers said. At the same time, funding from federal government funding agencies has also become a big problem.Eric Bloch, the NSF president who succeeded Knapp, seems willing to give the institute a much-needed seed grant, in the order of a million dollars, but he certainly won't come up with a thousand. Such a large amount of tens of thousands of dollars.A longtime friend of Cowan's, Alvin Trivelpiece, now director of the Department of Energy's research center, also made such a pledge.Brauch even suggested that it could be funded jointly by the two foundations.But the problem is that these things will only be possible after the institute forms a formal proposal and is adopted.However, waiting for proposals to be formed and approved is likely to take several years, because people are still working part-time.But before that, Cowan was short on operating funds.The Santa Fe Institute appears to be struggling.

So the March 9, 1986 board meeting consisted largely of brainstorming lists of people who might donate to the institute.Many ideas were discussed at length.It was not until the end of the meeting that Bob Adams, who was sitting at the far end of the conference table against the back wall of the conference room, hesitantly raised his hand. By the way, he said.He was recently in New York for a board meeting of the Russell Sage Foundation.The foundation has contributed a lot to sociological research.During the meeting, he spoke with John Reed, the new president of Citibank.Adams said Reed was a very interesting guy, and at just forty-seven, he was the youngest business executive in America.He grew up in Argentina and Brazil, where his father was a business executive.He has a bachelor of arts degree from Washington and Jefferson University, a bachelor's degree in metallurgy from MIT, and a master's degree in business from MIT's Sloan School of Business, with a wide range of scientific knowledge.At meetings of the Russell Sage Foundation board of trustees, he appears more than willing to exchange ideas with academic figures.

Anyway, over coffee he and Reed talked about the Santa Fe Institute, and Adams did his best to explain it to him.Reid was very interested.He certainly didn't have $100 million to give them.But he wondered if the institute could help him understand the world economy.When faced with problems in the world's financial markets, Reid says, professional economists are left to make up fairy tales.Citibank was caught in a Third World debt crisis under Reed's predecessor, Walter Wriston.Citibank lost a billion dollars in a year, and another 13 billion dollars may never be recovered.Economists hired by the banks not only failed to predict this would happen, but their advice only made things worse.

So Reed believes that a new understanding of economics may be needed.He asked Adams if the Santa Fe Institute was interested in solving the puzzle.Reed said he was even willing to come to Santa Fe to talk about the issue himself.What do you think? As soon as Adams finished speaking, Paines said, "I only thought about the proposal for a moment, and immediately said: 'That's a great idea!'" Cowan immediately responded. "Call him here," he said. "I'll go and raise the costs." Gell-Mann and others chimed in in favor of the idea.But everyone here knows in their hearts that the study of economics as a complex system is at least 20 years ahead of schedule.“It’s almost hard to define a discipline,” Cowan says. “It’s about human behavior.” But, hell, at the pace things are going at the Institute, they don’t have room to say no to anyone.It's worth a try.

Phil Anderson said on the phone that David (Paines), yes, he (Reid) was interested in economics.Economics was actually one of his hobbies.Yes, the meeting with Reed sounds interesting.But David, I can't come.I am too busy. Paines lobbied vigorously.He knew Anderson didn't like to travel, so he said, But Phil, if you get things sorted, you can come on Reed's private jet, and you can bring your wife.The two of you can enjoy a private jet ride together.That was wonderful.Those planes take you straight to your destination, saving you six hours from stepping out of your home to stepping in here.This also gives you a chance to get to know John.You can talk to him about the research project, you can...

All right, Anderson said, all right.I come. So, on Wednesday evening, August 6, 1986, Anderson and his wife, Joyce, boarded a Citibank plane and flew to Santa Fe.Well, Anderson has to admit it does fly fast, but it's also cold.Citibank's plane climbed to an altitude of 50,000 meters, which is much higher than the flying altitude of ordinary commercial aircraft.But the cabin heater didn't seem to be able to handle the cold, and Joyce Anderson huddled under a blanket in the back of the cabin.Anderson sits in the front row talking with Reed and his three assistants, Byron Knief, Eugenia Singer and Victor Menezes with economics.Also traveling with MIT economist Carl Kaysen (Carl Kaysen).The man chaired the Institute for Advanced Study in Princeton and is now a trustee of the Russell Sage Foundation and the boards of the Santa Fe Institute.

Anderson found Reid to be exactly what Adams described him as: smart, outspoken, and well-spoken.In New York, he gained notoriety for mass layoffs.But Anderson found that in private interactions he was easygoing and unassuming, a business executive who liked to put one leg over the arm of a chair while chatting with people.He was clearly not intimidated by the Nobel Prize winner.He said that he had long hoped for such an opportunity to meet.That's why he loves board meetings of the Russell Sage Foundation, as well as board meetings of other academic institutions. "This kind of thing is very interesting to me. It gives me the opportunity to talk to academic intellectuals. Their view of the world is very different from my daily work. Seeing the world from two different perspectives has benefited me a lot Shallow.” Reed recalled that going to Santa Fe had to consider how to explain his biased view of the world economy to a group of experts and scholars, which made him very excited. "It's obviously nothing like you're speaking to a group of bankers."

For Anderson, the trip to Santa Fe was an excellent ramble on physics, economics and the vagaries of global capital flows.He also found out that one of Reed's assistants wasn't just listening in.Eugenia Singer, still shaking in several sweaters, was here to give a report on a survey of econometric modeling for Reed.These econometric models include mainframe computer simulations of the world economy used by the Federal Reserve Bank, Bank of Japan, and other banks.Anderson took an immediate liking to her. Singer was not shivering because it was too cold in the cabin. "I was horrified by what John wanted me to do!" she laughs.She has nothing but a master's degree in mathematics and statistics, and especially lacks work experience in this field. "And John wants me to give lectures to Nobel Prize-winning physicists! To put it mildly, I don't think I'm technically qualified for that."

"This is the first time I've ever said no to a task John gave me. But he said lightly and nonchalantly, 'Hey, Eugenia, you're going to do it right. In that respect You know more than they do.'" So here she comes.It turns out Reed was right. The meeting, co-chaired by Adams and Cowan, convened at eight o'clock the next morning at a tourist ranch ten miles north of Santa Fe, with only a dozen people in attendance.Among those in attendance was Cowan's longtime friend Jerry Geist.He is the chairman of the New Mexico Public Service Corporation, a funder of the conference.The meeting was not intended to be a scientific exchange.It is an exposition and clarification, where each party tries to persuade the other to do what it very much wants the other to do. Reid spoke first.He brought a stack of clear film for projection.His problem, he said, was basically that he was trapped in a world economic system that defied economic analysis.Existing neoclassical economics theory and computer models based on it simply cannot provide him with the information he needs to make decisions when he is faced with risks and unstable factors.Some of these computer models are extremely complex.One of them, Eugenia, will be described in detail to you later.The computer model has 4,500 equations and 6,000 variables.But none of the models can really deal with social and political factors.These factors are often the most important variables.Most models assume that operators will manually enter interest rates, exchange rates, and other such variables that a banker expects an economic model to predict.Almost all of these economic models tend to assume that the world is never far from a static economic equilibrium, when in fact the world is often turbulent due to economic mutations and turmoil.In short, large econometric models can give Reid and his colleagues no more than they intuitively judged.The results may be all imagined. A recent example is the turmoil in the world economy marked by President Carter's appointment of Paul Volker as Federal Reserve head in 1979.Reed explained that this economic upheaval began in the forties.At that time, governments around the world were struggling with the economic consequences of the two world wars and the Great Depression in the West.Amid this dilemma, governments are recognizing that the world economy has become more dependent than ever on cooperation among nations.Nowhere was this consensus more prominent than in the Bretton Woods agreements of 1944.Under the New Deal, countries have abandoned their previous isolationist and protectionist policies, and began to agree to allow international organizations such as the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade to operate.It turned out to be very successful.From a financial point of view, the world economy has maintained stable development for at least 25 years. But in the 1970s, there were two oil crises in 1973 and 1979, the Nixon administration's policy of allowing the dollar to float freely in the international currency market, rising unemployment and the spread of "economic stagnation, inflation" - this All this led to the disintegration of the world economic system formed after the Bretton Woods agreement.Money began to move internationally at an ever-increasing pace.Third world countries, desperate for investment capital, are borrowing huge sums to develop their national economies, backed by American and European companies that are moving production overseas to cut costs. Citigroup and many other banks readily lend billions of dollars to these developing countries on the advice of the economists they hire, Reid said.When Paul Falk was sworn in as Federal Reserve head, he vowed to control inflation, no matter the cost, even if it meant sending interest rates through the roof and causing a recession.But no one really believed him.In fact, Reid said, neither the banks nor the economists they employed had noticed in time that governments were sending the same message.Government-enforced pain cannot be tolerated in any democracy, can it?So Citibank and other banks were still lending money to developing countries in the early 1980s.It wasn't until 1982 that Mexico first claimed that a disinflationary recession had left them unable to repay their loans.Then Argentina, Brazil, Venezuela, the Philippines, and many other developing countries all claimed the same. Reid said that since he became the president of Citibank in 1984, he has spent a lot of time sorting out this mess. So far, Citibank has lost billions of dollars, and the total loss of all banks in the world is about 300 billion U.S. dollars. . So, what kind of funding alternatives should he be looking for?Reid doesn't expect any new economic theory to be accurate enough to predict the rise of someone as special as Paul Falk.But new economic theory, more in line with social and political realities, should have predicted the rise of someone like Volker—who, after all, was very successful in keeping inflation under control for political reasons, anyway. What's more, he said, a better economic theory might help banks see the implications of Falk's actions. “Anything that increases our understanding and knowledge of the economic drivers of the world we live in is worth doing.” As far as he hears about modern physics and chaos theory, some ideas from physicists might be able to Applied to the development of a new economic theory.I wonder if the Santa Fe Institute can help? Those in Santa Fe were intrigued.For most of them, this is entirely new territory.Eugenia Singer's detailed introduction to the global computer model also aroused their great interest.These computer models presented by Eugenia include the planning link (contains 6,000 variables), the Federal Reserve's cross-country model, the World Bank's global development model, Wally's business model, and the global optimization model.She concludes that none of these models are practical, especially when dealing with economic changes and shocks. So the topic comes up again, can Santa Fe help? Well, maybe.Most of the afternoon was devoted to the elaboration and explanation of the scholars of the Santa Fe Institute on their views.Anderson talked about mathematical models of emergence and collective behavior. Others talked about using advanced computer graphics processing technology to transform mountains of data into vivid and easy-to-understand graphics, using artificial intelligence technology to simulate the ability to adapt, evolve and learn from experience. The dynamics of learning in the middle, and the possibility of using chaos theory to analyze and predict stock market price fluctuations, weather changes, and other such random phenomena.In the end, both parties naturally reached a consensus that this economic research is worth a try.“We all said at the time that it was possible to include this in the research program,” Anderson recalls. “What is missing from contemporary equilibrium economics that cannot predict the economic shocks that Reed was talking about?” Still, the Santa Fe side played tact and caution.Although Cowin and his colleagues desperately needed Citibank funds, they made it very clear to Reid that they could not guarantee a miracle.Some of their ideas might work, but it's a very risky project that might come to nothing.The last thing this fledgling institute needs are high expectations and empty promises.It would be tantamount to suicide if they promised something they couldn't keep. Reed said he could totally understand.“My thinking was, I don’t think we have to actually get to some kind of concrete result,” he recalls. He just needed some new ideas.So he promises not to impose any time limit, or even limit what kind of specific results will be achieved.It would be enough if the Santa Fe Institute could start working on this research and make noticeable progress year after year. "Reed's words ignited my enthusiasm for doing this research," Anderson said.The next step, they agreed, was to hold a conference, an extended seminar, where eminent economists and physicists could sit together to discuss various issues and come up with a workable research plan.If Reed is willing to donate a few thousand dollars, the Santa Fe Institute can get started. And so the deal was negotiated.The next morning, Reid and his assistants got up at five and drove to Santa Fe Airport in a limousine.Reid hopes to get back to New York on the East Coast as soon as possible to start a busy day at work.